The landscape of golf-related asset ownership has changed significantly since the financial crisis started in 2008. Many multi-venue owners have consolidated their portfolios. Savvy, well-capitalized developers and homebuilders have sought to both strategically dispose of and acquire lands and properties in preparation for the inevitable upswing in growth markets.
There have also been new entrants to the sector, both single and multi-property buyers, identifying the significant opportunities presented as a result of years of acquisition and development debt default. While some such opportunities continue to present themselves, and developers again look to breathe new life into stalled projects, the new economic order dictates that today’s transaction activity is ever more considered, diligent and strategic than in those years leading up to the crisis.
Each ownership category is now focused on implementing their operational and capital plans aimed at achieving their respective investment and lifestyle growth objectives while meeting their commitments to stakeholders.
At Global Golf Advisors, our Asset Management team counsel our owner and investor clients to pursue three steps in their search to maximize the value of their assets;
Step 1: Understand what you’ve got
- Asset Evaluation – The two key questions to be answered should be first “what needs to be done to maintain the capital” and secondly, “what can be done to enhance the value of the asset”? To address these, start with testing the previously determined values of the assets (golf and real estate), complete a capital review to conclusively measure deferred capital (include the golf course infrastructure and machinery, buildings, clubhouse – including furniture and fittings – and real estate), and finally develop a capital investment plan which will support the business plan and contribute to improving the value of the asset.
- Operations Review – perform a detailed operations review working with existing management to prepare a tactical plan for efficiencies and bottom line growth. This plan should address each department individually and utilize industry benchmarks and best practices to identify priorities.
- Management Capability – evaluating the capabilities of the management team to implement your improvement plans will ensure you have the required skillset and resources for success. This will inform ongoing performance measurement and management outsourcing evaluation.
- Real Estate Relationship – if applicable, review the relationships between the real estate and club/golf activities/memberships to increase the overall value of both assets.
- Information Systems – The operation and management of your club or facility will involve thousands of processes every day. Managing reservations and inquiries, applications, invoicing and billing, cash and credit transactions, events and communications may be just a few. When processes aren’t functioning effectively it often results in dissatisfied members or customers, frustrated staff, an expense in time and money and a question over the reliability of reported information. Evaluate an operations’ internal controls and business processes with the objective of improving efficiency, trust, and customer satisfaction while reducing the risk of duplicity or fraud.
- Market Study – complete a detailed market study which identifies improvements for revenue growth and increased values for the club and real estate. The market study should examine both the internal and external influences over the business including:
- Member / Customer Survey – We consider such surveys to be the cornerstone of a successful strategic business plan because it helps to uncover expectations, how your users define value, their tolerance for dues and fees increases and informs a capital plan which can target areas of greatest impact.
- Competitive Analysis – Savvy travelers and members have greater choice than ever before when it comes to investing their money and more importantly time in a golf destination. The asset manager should evaluate the local and destination-area markets thoroughly to understand the competition and how they price and package to attract your target market.
- Demand Analysis – measuring the potential demand for your facility requires a thorough analysis of your immediate and source of origin markets. This includes demographic, psychographic and participation studies. This process may expose gaps in market coverage that could become advantageous.
Step 2: Develop Your Plan
- Strategic Business Plan – the strategic planning process and the plan that results from that rigorous exercise are critical to the short-and long-term success of any business. It will support the investment objectives of the fund/owner, identifies what success looks like and provides a roadmap to how it will be achieved and the resources and investments required to do so. The strategic business plan will include:
- Vision and Strategic Goals
- Operating & Financial Plan
- Sales & Communications Plan
- Membership Strategy
- Financial Plan
- Organizational Plan
- Capital Enhancement Plan – the capital investment strategy for a golf asset must be informed of the strategic business plan and the research that informs it. It must support business growth and exploit opportunities for inherent value or in the proximity of the property.
- Exit Strategy – As the Wall Street saying goes “they don’t ring the bell at the top” and so for owners of golf assets, it is vital to determine what the optimum conditions for an exit from the asset are and the most appropriate strategies to either liquidate assets (including consummating the sales transaction) or transfer property to family members.
Step 3: Monitor the Progress and Results of your Plan
- Performance Evaluation – On a periodic basis (monthly, quarterly, annually) review both the performance of the management team and the business plan based upon the determined metrics and best practices. Apply industry benchmark data to all your key metrics including those for revenue, cost, yield, margins, headcounts, satisfaction, and utilization. This is done effectively by applying the appropriate information systems, such as Global Golf Advisors’ Performance Intelligence Platform.
- Keep Informed – While it is not advisable to continuously change strategy, the fast-paced world in which we live in requires tactics to remain flexible and adaptable to changing conditions. Asset managers must engage a method to measure current and actionable market, operational and financial intelligence to support management in their quest to successfully achieve the club’s strategic goals and objectives.
For savvy investors and owners, these steps facilitate a thorough understanding of your asset and the market in which it operates, they encourage informed business planning and enable the setting and monitoring of appropriate performance metrics. Each is key if you are to maximize the performance of your asset, driving its value and critically, determine the most appropriate time at which to exit.
Rob Hill is a Partner at GGA. With deep roots in public accounting and unrivaled experience with golf-related asset development, financing, appreciation and investment strategies, GGA assists private equity groups, financial institutions, individual investors and lenders with their most complex problems. The firm serves over 2,900 clients around the world from offices in USA, Canada, Sydney (Asia-Pacific) and Dublin (EMEA). Rob can be reached at [email protected]